How effective has this strategy been? Here is a snapshot of selected yields and the 30-year fixed mortgage since the inception of Operation Twist.
The 10-year note had been hovering around the two percent level for the past few months after hitting its historic low of 1.72 immediately following the September 21st "Twist" announcement last year. Despite the Fed's stated purpose of lowering long-term interest rates, the 10-year steadily rose to an interim high of 2.42 on October 27th, but it soon settled into a pattern of hovering around 2.00 with the one quick dip to 1.82 and an upper range of 2.11. But in mid-March the yield on the 10 surged to a closing high of 2.39 on March 19th and then declined to a hover range around 2.23. Since the mid-March drama, which was certainly counter the Fed's stated intention, the yield on the 10-year has steadily fallen to its historic closing low of 1.59.
The 30-year fixed mortgage, according to the latest Freddie Mac weekly survey, is at its all-time low at 3.75.
As for loans to small businesses, here's a snippet from the latest NFIB Small Business Economic Trendsreport:
|Financing remained low on the list of concerns for business owners. Only 3 percent cited financing as their top business problem. Ninety-two (92) percent reported that all their credit needs were met or that they were not interested in borrowing.|
It will be interesting to watch yields during the final month of Operation Twist. Will they drop further? Rise in anticipation of further Fed intervention? Or continue to oscillate in the current range?
Background Perspective on Yields
The first chart shows the daily performance of several Treasuries and the Fed Funds Rate (FFR) since 2007. The source for the yields is the Daily Treasury Yield Curve Rates from the US Department of the Treasury and the New York Fed's website for the FFR.
Here's a closer look at the data since 2010 with the 30-year fixed mortgage added to the mix (excluding points).
The next chart shows the 2- and 10-year yields with the 2-10 spread highlighted in the background.
The final chart is an overlay of the CBOE Interest Rate 10-Year Treasury Note (TNX) and the S&P 500.
For a long-term view of weekly Treasury yields, also focusing on the 10-year, see my Treasury Yields in Perspective.